9

Rating ? Qualities ?
Analytical
Overview
Well Structured

Buy book or audiobook

CEO Excellence
The Six Mindsets That Distinguish the Best Leaders from the Rest
Carolyn Dewar, Scott Keller and Vikram Malhotra • From CEO EXCELLENCE: The
Six Mindsets That Distinguish the Best Leaders from the Rest by Carolyn Dewar,
Scott Keller, and Vikram Malhotra. Copyright © 2022 by McKinsey & Company, Inc.
Reprinted by permission of Scribner, a Division of Simon & Schuster, Inc. • 384 pages

Leadership / Business Leaders

Management / Being CEO

Take-Aways
• CEOs need six expert mind-sets to deal with their relentless responsibilities:
• 1. “Direction-setting” mind-set – Open opportunities for growth and prosperity, never play it safe.
• 2. “Organization alignment” mind-set – Excel at the hard stuff and the soft stuff.
• 3. “Mobilizing leaders” mind-set – Senior management team members must pull together.
• 4. “Board engagement” mind-set – Trust and transparency carry significant weight.
• 5. “Stakeholder connection” mind-set – Everyone matters.
• 6. “Personal effectiveness” mind-set – Don’t let your difficult job overwhelm you.

1 of 6
Recommendation
Advice telling chief executive officers how to achieve superior results saturates the market, but this
collaborative effort from three McKinsey senior partners – Carolyn Dewar, Scott Keller and Vikram
Malhotra – sets a high bar. Extensive, in-depth research from McKinsey and the authors’ interviews with
67 corporate leaders yield a treasure trove of rich information, original guidance and pragmatic insight for
established and aspiring CEOs. The authors and their experts tell corporate chief executives how to satisfy
the endless demands of one of the world’s toughest jobs. The book outlines six pivotal chief executive officer
responsibilities – “Setting the direction, aligning the organization, mobilizing through leaders, engaging the
board, connecting with stakeholders and managing personal effectiveness” – and reveals the mind-sets that
distinguish the best CEOs from the rest.

Summary

CEOs need six expert mind-sets to deal with their relentless responsibilities.

Ask three CEOs to identify their most important responsibilities, and they will give you three different
answers. Yet everyone agrees that CEOs shape organizational performance – particularly regarding finances.
Top-level CEOs generate nearly three times more total return to stakeholders than less-effective CEOs. A
$1,000 investment in a typical S&P 500 index fund produces roughly $1,600 in gains in the course of 10
years. Investing in companies led by the highest-ranked CEOs will earn around $10,000 during that time
span.

Today’s CEOs influence much more than rates of return, given society’s growing concern with human rights,
health care, the environment and other issues. Performance means everything. In the last couple of decades,
for example, roughly a third of Fortune 500 CEOs lost their jobs after less than three years on the job. Two
out of five new CEOs don’t last 18 months.

“From 2000 through 2019, the average CEO tenure in the United States decreased from
10 years to less than seven.”

In addition to their expected duties, CEOs must stay current with developing technologies, cybersecurity,
diversity, inclusion and much more. And every CEO must be mindful that social media can instantly turn
any misstep into a firestorm of controversy.

Even the most qualified, experienced leaders aren’t necessarily ready for the rigors of being CEO. CEOs
essentially function alone on their own islands. Unlike running a unit or territory and being part of
a team, they have no peers or anyone to blame. Everything is their responsibility. CEOs must juggle
seemingly contradictory tasks: tending to short-term issues while staying atop long-range performance
initiatives and results, and acknowledging tradition and continuity while coping with disruption and
encouraging innovation.

www.getabstract.com
2 of 6
The authors distilled a list of 200 elite leaders. Their comprehensive interviews with 67 of these leaders
yielded six key CEO responsibilities: “Setting the direction, aligning the organization, mobilizing through
leaders, engaging the board, connecting with stakeholders and managing personal effectiveness.”

The six expert mind-sets CEOs need to master to carry out these responsibilities are:

1. “Direction-setting” mind-set – Open opportunities for growth and prosperity;

never play it safe.

Many CEOs adopt a cautious approach to change. They understand the gravity of their decisions and try
to avoid mistakes. However, the best CEOs recognize that meaningful growth demands taking risks and
embracing potential game-changing opportunities. They establish an expanded organizational vision,
finding the perfect intersection between the core of their companies and the market.

Netflix co-founder and CEO Reed Hastings, for example, had far more ambitious goals than merely renting
DVDs. In retrospect, his goal of creating a worldwide “entertainment distribution company” makes perfect
sense today, considering Netflix’s current dominance. Yet if Hastings hadn’t pursued his unique vision,
Netflix probably would have suffered the same fate as Blockbuster, the defunct former video rental king.

When Herbert Hainer took over at Adidas in 2001, sales were lagging, and the company was struggling with
new shoe designs. Some CEOs would have addressed the revenue crisis by cutting expenditures and urging
employees to sell more shoes. Instead, Hainer revamped the firm’s marketing strategy to emphasize athletic
performance. Hainer was certain that if the company’s products helped athletes run faster, jump higher, and
play soccer and tennis better, profits would rise. When Hainer retired in 2016, Adidas’s market value had
risen from $3.4 billion to more than $30 billion.

“The goal wasn’t to be the biggest and the richest, it was to start creating products that
helped athletes perform better.”

Big, gutsy moves often yield transformational results. When Satya Nadella became CEO of Microsoft
in 2014, the tech giant was losing relevance. Nadella spent $50 billion on acquisitions that boosted
performance – adding platforms LinkedIn and GitHub, among others. He doubled Microsoft’s financial
commitment to the cloud and artificial intelligence (AI), and shifted Microsoft to online subscription
services. Nadella sold Microsoft’s cellphone business after the corporation spent billions trying to
compete with Apple and Google. From the start of Nadella’s tenure through 2020, revenues rose roughly
60%.

2. “Organization alignment” mind-set – Excel at the hard stuff and the soft stuff.

Change is more emotional than intellectual. It involves “people and culture,” and, therefore, always involves
emotion. Soft stuff – emotions and company culture – is often the primary cause of strategic misfire.
Most CEOs are more comfortable dealing with the hard stuff, and leaving culture and people to other
departments. Elite CEOs take a different approach: They regard hard and soft stuff as equally important.

www.getabstract.com
3 of 6
 “Once a CEO sets a direction for the company’s future, the probability that the plan will
become reality is low.”

When CEOs honor both aspects, their chances of successfully executing a strategy jump from 30% to 79%.
Plus, the effectiveness of execution is nearly twice as great.

In attempting to transform corporate culture, top CEOs start by pinpointing a specific area or concern.
For example, at his first shareholder meeting after he took over the struggling aluminum manufacturer
Alcoa, Paul O’Neill announced he would focus on workplace safety.

When investors pressed him about other issues such as inventory, O’Neill insisted that a declining injury
rate would signal the workforce’s unified commitment to excellence. Alcoa enjoyed record-setting profits
within a year. By the time O’Neill retired 13 years later, Alcoa’s income had grown by a factor of five.

“You have to fix both sides as the CEO. The easy part is technical; the difficult part is
people…Over time, if you can’t solve the mind-set issues, you’ll go back on the same route
because the mind-set is going to drive you again over a cliff.” (Johan Thijs, KBC)

Ajay Banga of MasterCard established a “Decency Quotient” that applies to a variety of behaviors and
circumstances. Ana Botin, CEO at Banco Santander, which has a 200,000-person workforce, encourages
employees to embody the company’s “Simple, Personal, Fair” motto, and always act in consumers’ best
interests. Former Sony CEO Kazuo Hirai rallied his people around the Japanese word kando, urging them to
create a “wow” experience for every customer.

No matter how descriptive or motivational a catchphrase may be, it’s useless unless the workforce embraces
change. CEOs set the tone. When former Inuit CEO Brad Smith wanted to emphasize accountability and
self-improvement, he began posting his performance reviews on his office window. His leadership team soon
followed suit. Before long, employees felt safe admitting mistakes and taking corrective actions.

“A big part of your job is dealing with all the unsolved problems.”

In his attempt to get the Cleveland Clinic on track, former CEO Toby Cosgrove refurbished the rooms to
admit more sunlight, upgraded food quality and redesigned patients’ gowns. More significantly, he had all
40,000 employees wear badges that said, “I am a caregiver.”

3. “Mobilizing leaders” mind-set – Senior management team members must pull

together.

When investors examine the potential of a new IPO, they consider the quality of the top management team.
Companies are two times more likely to exceed average performance when top managers work together
toward a common goal.

Building an executive team is one of a CEO’s most important tasks. Roughly half of senior executives think
their top management team is underachieving, but two-thirds of CEOs say everything is OK, which suggests
a crucial, dysfunctional disconnect. Egos, personal agendas and different perspectives, among other factors,
impede senior team members from pulling in the same direction.

www.getabstract.com
4 of 6
The process of building a functional, united upper management team begins with defining executives’ roles
and determining what abilities, knowledge and experience they need. Almost every CEO wants people who
can balance short-term responsibilities with long-term aspirations.

Kazuo Hirai, for example, looked for people with proven track records in the specific areas in which he
needed managers. He sought people who weren’t afraid to push back and voice their opinions and concerns.

“Having a good attitude combined with the right aptitude isn’t just nice to have; it’s
essential for every member of the team.”

If CEOs decide certain people aren’t a good fit, they should extend some benefit of the doubt, but act quickly
when necessary. Former Novo Nordisk CEO Lars Rebien Sørenson, for example, resisted pressure to fire the
head of an underperforming division. He believed the division chief wasn’t the root of the problem. Sørenson
and the division head made the necessary adjustments to improve performance. This saved the division
head’s job.

Assembling a team of talented professionals doesn’t guarantee a strong performance. Performance always
depends on how they collaborate and trust one another. The best CEOs focus their senior management
teams on critical issues that can make or break the organization, not on relatively trivial issues that others
can handle.

4. “Board engagement” mind-set – Trust and transparency carry significant weight.

A CEO’s most formidable challenges include interacting with the board of directors. CEOs are accountable to
a group of people he or she didn’t hire, and cannot control. To complicate matters, only one-third of board
members believe their companies’ processes are effective, and only 50% of CEOs say their boards meet their
performance expectations.

“The board is a great tool to help the business succeed, if you know how to invite them
in.” (Doug Baker, Ecolab)

CEOs must establish solid relationships with their board members and help them run the organization
efficiently. However, because board members only show up for meetings, CEOs may be tempted to keep
them out of the loop regarding certain issues or processes. Showing such a lack of trust and transparency
always backfires.

When Mastercard’s Ajay Banga, for example, made a wasteful acquisition, he admitted his mistake to
his board, preserving his credibility. CEOs who won’t share sensitive or negative news risk exposure
and criticism when the information comes to light – and it always does. CEOs should develop a strong
connection with their board chairs in particular. Using the chairperson as a sounding board and adviser
benefits the entire operation. When she was at Westpac, Gail Kelly felt it was the CEO’s responsibility to
build a sound working relationship with the board chair, not the other way around.

www.getabstract.com
5 of 6
5. “Stakeholder connection” mind-set – Everyone matters.

When it comes to forging a strong connection with stakeholders, a CEO can’t risk ignoring anyone. Every
sector matters: customers, employees, vendors, partners and regulators. Research indicates that stakeholder
engagement can affect earnings by up to 30%. Additionally, fallout from a crisis may be less severe if the
CEO enjoys a trusting, credible relationship with multiple stakeholder groups.

“The best CEOs…embrace uncertainty with a view that fortune favors the bold.”

Maximizing profits is no longer a corporation’s sole purpose. Nearly 90% of US consumers prefer to do
business with companies that “support issues they care about.” And 94% of new employees want to be
involved with social causes. An increasing number of companies proactively demonstrate their commitment
to social purposes. Twitter and Facebook, for example, cut ties with Donald Trump early in 2021. Best Buy,
MasterCard and American Express were among corporations that stopped contributing to members of
Congress who voted to dispute the 2020 presidential election results.

6. “Personal effectiveness” mind-set – Don’t let your difficult job overwhelm you.

An executive coach told Brad Smith of Intuit that outworking the job of being a CEO is impossible; the day
simply doesn’t have enough hours. Exceptional CEOs don’t allow extraneous commitments to swallow them
or their lives. They establish priorities, build flexibility into their schedules, and leave time for themselves,
their families and their outside interests. For example, Kasper Rørsted of Adidas usually finishes his
workdays by 6 pm in order to exercise. He spends the weekends with his wife and four children.

“If you’re known to be tougher and more irritable at the end of the day than at the
beginning of the day, then you don’t know how to compartmentalize. You just have to
take everything as it is and isolate, manage it; isolate, manage it.” (Richard Davis, US
Bancorp)

Great CEOs compartmentalize. They devote their full attention to one issue or one meeting at a time, and
they don’t carry emotional baggage from one situation to the next.

About the Authors

Carolyn Dewar, Scott Keller and Vikram Malhotra are senior partners at McKinsey & Company.
Carolyn Dewar has published more than 30 articles in the Harvard Business Review and the McKinsey
Quarterly. Scott Keller’s books include Leading Organizations and Beyond Performance.

Did you like this summary?

Buy book or audiobook
http://getab.li/45415

getAbstract maintains complete editorial responsibility for all parts of this review. All rights reserved. No part of this review may be reproduced or
transmitted in any form or by any means – electronic, photocopying or otherwise – without prior written permission of getAbstract AG (Switzerland).

6 of 6